DEFINITION of 'Naked Put'

A put option whose writer does not have a short position in the stock on which he or she has written the put. Sometimes referred to as an "uncovered put."

BREAKING DOWN 'Naked Put'

Naked puts are very risky since the writer can lose big if the underlying asset moves opposite to the desired direction. But, profits are huge if the underlying asset moves in the right direction.

RELATED TERMS
  1. Naked Writer

    An options seller who does not own the underlying security for ...
  2. Writer

    The seller of an option who collects the premium payment from ...
  3. Put To Seller

    The exercise of a put option. Put to seller would usually occur ...
  4. Uncovered Option

    A type of options contract that is not backed by an offsetting ...
  5. Short Put

    A type of strategy regarding a put option, which is a contract ...
  6. Covered Writer

    An options seller who owns the underlying security represented ...
Related Articles
  1. Trading

    Naked Options Expose You To Risk

    Find out why these enticing options can spell trouble for your bottom line.
  2. Trading

    Prices Plunging? Buy A Put!

    You can make money on a falling stock. Find out how going long on a put can lead to profits.
  3. Trading

    Introduction To Put Writing

    Learn about a strategy that may be appropriate if you have a positive outlook on a stock.
  4. Personal Finance

    Becoming A Financial Writer

    Instead of working on Wall Street, write about it.
  5. Trading

    Naked Call Writing: A Risky Options Strategy

    Learn about this aggressive trading strategy to generate income as part of a diversified portfolio.
  6. Trading

    Options Hazards That Can Bruise Your Portfolio

    Learn the top three risks and how they can affect you on either side of an options trade.
  7. Trading

    Prices Plunging? Buy A Put!

    Investors can make money on a falling stock by going long on a put.
  8. Trading

    Bear Put Spreads: A Roaring Alternative To Short Selling

    This strategy allows you to stop chasing losses when you're feeling bearish.
  9. Trading

    Three Ways to Profit Using Put Options

    A brief overview of how to profit from using put options in your portfolio.
  10. Trading

    Difference Between Short Selling And Put Options

    Short selling and put options are used to speculate on a potential decline in a security or index or hedge downside risk in a portfolio or stock.
RELATED FAQS
  1. Are there any risks involved in trading put options through a traditional broker?

    Explore put option trading and different put option strategies. Learn the difference between traditional, online and direct ... Read Answer >>
  2. My brokerage firm won't allow naked option positions. What does this mean?

    A naked position refers to a situation in which a trader sells an option contract without holding a position in the underlying ... Read Answer >>
  3. Are put options more difficult to trade than call options?

    Learn about the difficulty of trading both call and put options. Explore how put options earn profits with underlying assets ... Read Answer >>
  4. How do you trade put options on E*TRADE?

    Learn all about put option trading at E*TRADE. Explore margin accounts and become familiar with the different types of option ... Read Answer >>
  5. When is a put option considered to be "in the money"?

    Learn about put options, what they are, how these financial derivatives operate and when put options are considered to be ... Read Answer >>
  6. How do traders combine a short put with other positions to hedge?

    Learn how sold puts can be utilized in different types of hedging strategies, and understand some of the more common option ... Read Answer >>
Hot Definitions
  1. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  2. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  3. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  4. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  5. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  6. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
Trading Center